The aim of the present study was to develop and evaluate microsponge based topical delivery system of acyclovir for sustained and enhanced drug deposition in the skin. Microsponges containing acyclovir were prepared by an emulsion solvent diffusion method. The effect of formulation variable such as drug: polymer ratio, stirring speed, internal phase on the physical characteristics of microsponges were analyzed in order to optimize the formulation. These two microsponge formulation were prepared as gel in 0.35 %w/w carbopol and studied for pH, viscosity, spreadability, drug content, and in vitro release. Shape and surface morphology of the microsponges were examined using scanning electron microscopy. The formulations were subjected to in vitro release studies and the results were evaluated kinetically and statistically. Developed microsponges were spherical and porous, and there was no interaction between drug and polymer molecules. Drug release through cellulose dialysis membrane showed diffusion controlled release pattern from microsponge based formulations by 8 h. acyclovir was stable in topical gel formulations and showed enhanced retention in the skin indicating better potential of the delivery system for treatment of viral infections and reduce the side effects.